Recent work in economics has shown that many significant industries are based on “two-sided platforms” that enable distinct groups of customers to interact with each other and obtain the benefits of externalities between them. These include old-economy industries such as advertising-supported media and new-economy industries such as those based on software platforms and web portals.
Pricing and other business strategies are strongly affected by the interdependencies between the two sides of the platform. As a matter of theory, for example, the profit maximizing prices may entail below-cost pricing to one set of customers over the long run and, as a matter of fact, many two-sided platforms charge one side prices that are below marginal cost and are in some cases negative.
Antitrust analysis of single-firm conduct—and, of course, all antitrust analysis— should be cognizant of the economics of two-sided platforms. This paper provides a brief introduction to this topic.